FROM: Robert Thompson, General Manager
Originator: Wally Ritchie, Director of Finance
SUBJECT:
title
PROPOSITION 218 NOTICES
end
GENERAL MANAGER'S RECOMMENDATION
recommendation
RECOMMENDATION: Recommend to the Board of Directors to:
A. Direct staff to prepare and mail Proposition 218 compliant notifications to affected property owners outlining a five-year regional sewer service fee schedule with annual increases of approximately 3.53 percent for fiscal year 2027-28 and 4.75 percent for fiscal years 2028-29 through 2031-32; and
B. Approve a Sole Source Purchase Order with United States Postal Service for postage to mail the Proposition 218 compliant notifications for an amount not to exceed $400,000.
body
BACKGROUND
The Orange County Sanitation District’s (OC San) current five-year sewer fee rate schedule expires at the end of fiscal year 2027-28. OC San staff proposes the Board adopt the next five-year regional sewer fee schedule a year earlier than anticipated to be able to assess fees on the customers transferred as part of the Flow Exchange Agreement with Irvine Ranch Water District. OC San engaged HDR Engineering, Inc, an engineering consulting firm, to provide an independent analysis of OC San’s cash flow modeling and a comprehensive cost of service study to ensure the appropriate allocation of costs and fees. This study has been completed and presented to the Administration Committee at this meeting as a separate agenda item. Based on this information, forecasted operating expenses, and cash flow modeling, staff recommends annual increases on average of 3.53% for fiscal year 2027-28 as previously adopted and 4.75% for fiscal years 2028-29 to 2031-32. The rates for fiscal year 2027-28 are proposed to remain the same as adopted in the previous five-year rate schedule.
RELEVANT STANDARDS
• Stable rates based on a validated cost structure which minimizes unforeseen rate increases
PROBLEM
Proposition 218 requires that OC San notify the affected property owners within OC San’s service area of proposed rate increases and to conduct a public hearing that coincides with the second reading of the ordinance. Notices must be mailed to property owners 45 days prior to the public hearing.
PROPOSED SOLUTION
With Board approval, a notice of rate changes will be mailed to every affected property owner within OC San’s service area. These rates will be scheduled for adoption through the ordinance process that requires a public hearing, two Board meetings, and a 2/3 majority approval of the Board. The estimated cost of postage will not exceed $400,000 for approximately 600,000 notifications.
TIMING CONCERNS
Rate approval schedule:
• November 2026: Administration & Operations Committees - Rate Structure Presentation • November 2026: Board Meeting - Approval of Proposition 218 Notices
• February 2027: Proposition 218 45-day notices mailed for Sanitary Sewer Fees
• March 2027: Board Meeting - 1st Reading of the Ordinance
• April 2027: Board Meeting - 2nd Reading of the Ordinance, Public Hearing & Adoption
• July 1, 2027: New rates go into effect
Due to the critical, time-sensitive nature of this procurement, staff recommend proceeding with the procurement.
RAMIFICATIONS OF NOT TAKING ACTION
Existing sewer service fees will be insufficient to support OC San’s operating expenses and Capital Improvement Plan.
PRIOR COMMITTEE/BOARD ACTIONS
N/A
ADDITIONAL INFORMATION
The Proposed Annual Single Family Residential Fee Schedule:
Current $397
FY 2027-28 $411
FY 2028-29 $431
FY 2029-30 $451
FY 2030-31 $472
FY 2031-32 $495
CEQA
N/A
FINANCIAL CONSIDERATIONS
This request complies with authority levels of OC San’s Purchasing Ordinance. This item has been budgeted (Budget FY 2026-27 and 2027-28, Section 6, Page 44, Supplies) and the budget is sufficient for the recommended action.
ATTACHMENT
The following attachment(s) may be viewed on-line at the OC San website (www.ocsan.gov) with the complete agenda package:
• Draft Residential Prop 218 Notice